House Votes to Rein in Wall Street Pay

Vote Comes after 9 Bailed-out Banks Gave Execs Bonuses Topping $1 Million Each

(AP)  The House voted Friday to slap restrictions on how Wall Street executives are paid after nine banks that took government bailout money rewarded thousands of their employees with bonuses topping $1 million each.

Bowing to populist anger and defying President Barack Obama's suggestion that government rely on incentives instead of intervention to curb excessive salaries and bonuses, the House passed the bill on a 237-185 vote.

“This is not the government taking over the corporate sector. . . . It is a statement by the American people that it is time for us to straighten up the ship,” said Rep. Melvin Watt, D-N.C.

Although the bill doesn't give Mr. Obama exactly what he wanted, it advances the first piece of his broader proposal to increase oversight of financial institutions. The Senate was expected to take up the package after Congress returns in September from its summer recess.

The House bill includes Mr. Obama's suggestions to give shareholders a nonbinding vote on compensation packages and prohibit directors on compensation committees from having financial ties to the company and its executives.

But the bill goes farther than Mr. Obama wanted by prohibiting pay incentives that encourage employees to take financial risks that could threaten the economy or viability of the institution.

Mr. Obama said giving shareholders a “say on pay” and diminishing management influence on pay packages would go far in curbing the lavish pay seen at some banks.

Rep. Barney Frank, D-Mass., who sponsored the bill, said the extra regulation is necessary to ensure bankers and traders aren't rewarded only if they take big risks. Under the provision banning risky incentive-based pay, regulators would be given nine months to dictate precise guidelines.

If a bet goes wrong, “the company loses money and the economy may suffer, but the decision makers do not,” he said.

The vote came one day after New York Attorney General Andrew Cuomo reported that the nation's biggest banks awarded nearly 4,800 million-dollar-plus bonuses in 2008 even as their profits dwindled and they accepted billions in government aid.

Citigroup, which is now one-third owned by the government after taking $45 billion in government money, gave 738 of its employees bonuses of at least $1 million, even after it lost $18.7 billion during the year, Cuomo's office said.

Aware of voter outrage on the bonuses, Republicans reluctantly pushed back. They said severe restrictions should apply only to banks that accept government aid.

The legislation's ban on risky compensation would apply to any firm with more than $1 billion in assets, including bank holding companies, broker-dealers, credit unions, investment advisers and mortgage buyers Fannie Mae and Freddie Mac.

The effect will be to force “financial institutions who did not contribute to the crisis to pay for the mistakes of others,” said Rep. Michael Castle, R-Del.

Rep. Jeb Hensarling said the government would be better off terminating the $700 billion bank bailout program established last year.

“If you quit bailing out risky behavior, Mr. Chairman, you'll receive less risky behavior,” said Hensarling, R-Texas.

Republicans also cast the proposal as too liberal even for Obama.

Frank snapped back: “We are not taking orders from the Obama administration.”

Also on Friday, a group of 11 bipartisan senators pressed Federal Reserve Chairman Ben Bernanke to name the financial institutions that have received emergency assistance from the Fed and disclose how much help each received.

The Fed has invoked its emergency powers to provide assistance to some banks, but has not disclosed the details out of concern that the information would cause a run on the institutions.

The senators, led by North Dakota Democrat Byron Dorgan and Iowa Republican Chuck Grassley, said the information should be released now that banks are reporting profits and paying back bailout money.

[nottellin1]

If the government had stayed out of it in the first place these companies would hyave failed and there'd be no bonus money to give out. Barney Frank is pissed because some of the money he authorized is being used to reward employees that helped these companies remain viable. Consider this: if the government limits the pay of executives thyat manage well and will bail out a company that executives have managed badly, where is the incentive to manage well?

[nottellin1]

Doesn't Barney Frank remind you of Elmer Fudd???? He is just as idiotic too!!!

[robinspp]

Bush destroyed the US economy. Obama is fixing it. He is too good. Someone has to control the swindlers; otherwise few hundred CEO?s will take every Penney from the people?s pocket. They are criminals, they should be put in prison.

[robinspp]

Bush destroyed the US economy. Obama is fixing it. He is too good. Someone has to control the swindlers; otherwise few hundred CEO?s will take every Penney from the people?s pocket. They are criminals, they should be put in prison.

[pensacola8-2009]

If congress was smart, the best way to approach the greed is right at the heart of the engine of business that compensates executives so lavishly.

This can be done by passing a law that lowers the bond rating three letter grades for all publicly traded companies on the stock exchange when any executive is compensated with greater salary than $400,000. This permits the salary to be high as it currently is, but when that company borrows, it will be forced to pay higher interest for its loans than companies who compensate at a lower rate. Compare a billion dollar loan at 3% to 7%. The deterence will be a strong signal that those coming to Wall Street to get greedy will pay when they borrow. If they take lower compensation during the term of the loan, then they can raise their bond ratings and borrow at a lower interest rate again.

[pepperwood2]

House Votes to Rein in Wall Street Pay......Vote Comes after 9 Bailed-out Banks Gave Execs Bonuses Topping $1 Million Each

Yes And these same Congressional Elite all voted in favor of the largest Congressional Pay Raise in History that BO quickly signed. The no change business as usual politics that got us into this mess. Its enough to make you puke.

[ibsteve2u]

I don't mind paying Congress well...anything that makes them less tempted by those big wads of dollars the lobbyists have is a good thing.

If anything is apparent, depending upon Congress - or the leaders of any large American entity - to integrate "enlightened self-interest" into their actions is foolhardy.

Best to pay 'em well, and make the club that falls upon them for corruption much heavier and much pointier.

[ABM_21]

Reigning in runaway bonuses on Wall St. Now, there's a good idea if I ever heard one. Aren't these the same clowns that caused this financial debacle in the first place? Yet, these are the clowns receiving billions in taxpayer money for 'bonuses' they neither earned nor deserved. If I recall, a 'bonus' is earned by someone for doing a good job, not just because they happen to work in a particular industry. If that's the way pay is designed in the financial industry, perhaps they should consider changing how the employees are paid.
There has also been this rush by some of the more ignorant factions on this forum to blame this financial fiasco on housing market, most notably, on all those poor people who got 'houses they couldn't afford'. Ahh yes, blame the victim; a typical Republican approach to solving a problem they created. For one thing, I guess none of these Rethuglicans ever heard of predatory lending. These were lenders who lent people the money, but then had conditions written into the loans which required a balloon payment towards the end of the loan. This, along with Bush's love affair with outsourcing, cost many people to lose their jobs, which means they could not make these absurd payments. Why did they sign off on these loans? Simple: If that's the only loan you can get in order to finance a house, more often than not you take it. Wall St., more often than not, plunders Main St. in order to make a fast back. The poor were never to blame for this; it was greed at the top.
No one who borrowed money from the government in order to stay in business deserved a 'bonus' of any kind. Add to that fact many of these people were already super wealthy, so missing one bonus was NOT going to hurt them that much.
The government doesn't determine what the poor make? I guess you never heard of 'minimum wage' then. You know, the lowest amount you can pay any employee on the books, which is why so many Rethuglicans want to do nothing about illegal immigration. That way, they have a steady supply of workers available for exploitation.

[hungry1968-16]

by geecee827 July 31, 2009 4:45 PM EDT
Well, I'll answer it. Pearl Harbor had nothing to do with Hitler (sort of like 9/11 had nothing to do with Iraq). Nevertheless, Hitler was bombing the s**t out of England and taking over all of Europe. How long do you think we should have waited before we got involved?







Japan and Germany were allies in WWII. When we were attacked by Japan, we were attacked by ALL of the "axis" powers - Germany, Japan, and Italy.

We provided all sorts of material support to England and the allies, but didn't get involved - militarily - until Pearl Harbor.

Disassociating Japan from Germany in WWII, like in your comparison to 9/11 and Iraq, is foolish.

[Newster1]

by SouthwestisBest July 31, 2009 10:38 AM EDT
Congress does not have the authority to tell private businesses what their rate of pay must be. "


Million dollar BONUS checks are not "pay" and certainly not when the company is in so much red ink they have to come to the US taxpayers for MONEY just to keep their door open, and then give away huge chunks of that TAXPAYER money to a handfull of corporate mo fo's who like in $20 million homes!

Sorry PAL, but the whole thing is WRONG, but your buddy BUSH is the one who pushed the bailout money before his behind got out of power.
Odd too how gas prices since that oil guru nut case left office has dropped to about 60% of what it was almost immediately, and has remained fairly stable!

[Newster1]

Politico's Roger Simon didn't buy into Liddy's defense:

"The best and the brightest? Is this guy serious? As of Sunday, AIG stock had gone down 99 percent over the past year because of these geniuses. But we have to worry they might quit and go elsewhere?

"Fine. Let them go. Maybe they can get jobs in Zimbabwe, where kleptocracy is official policy. I think some of them would feel more comfortable there."

[Newster1]

by Joe_NY_15 July 31, 2009 11:16 AM EDT
by misha256 July 31, 2009 10:41 AM EDT

Now getting paid for your job, is "wealth sharing" in your twisted liberal eyes ?? Let the shareholders vote out the board if they don't like how they run things.

But I can't wait until Obama starts dictating what you earn (if you work)....then watch your opinion change.
==

Man, you people are either loons or you dont read much! its about these mo fo corporate conglomerates ripping US off for free bail out cash claiming they are broke, but handing out million dollar bonuses to the people who caused them to fail in the first place, the very ones who sock you with a $49 late charge for a credit card payment that arrives they claim- a few hours late, or $49 fee for an accidentally bounced check- the one they take their fee out FIRST for, virtually guaranteeing by the time you get the notice in the mail that more checks will come in and bounce!

[sjc_1]

"...government taking over the corporate sector..."

Those wrong wing nut liars are at it again. Say anything you can to put fear into the minds of the public. These lying sacks ought to be held accountable for their fear mongering. There is free speech and then there is yelling fire in a crowded theater. There is a big difference and rational and sane people know what that difference is.

[DocD--2008]

"President Barack Obama has proposed trying to discourage excessive corporate pay by giving shareholders a nonbinding vote on compensation packages and requiring that compensation committees not have financial relationships with the company and its executives."

Make it a BINDING vote and it may work a bit better.. Nonbinding means just that, it's a vote that does not count for anything, and they know this.

They should also take anyone who gave these huge bonuses and the ones who excepted them and put them in JAIL (after taking all the money back). Maybe then Wallstreet will start to understand, if not, they can join the rest of them in jail.

[Newster1]

As was posted before, this says it all, especially the quote by Roger Simon!!

March 17, 2009
Excessive Righteous Indignation Over AIG Bonuses
Posted by Daniel Farber | Comments 84


(AP Photo/Mark Lennihan)


Sen. Charles Grassley, R-Iowa, has some harsh advice for AIG executives who took a share of the $165 million in bonuses paid out last week.

Speaking to a Cedar Rapids, Iowa, radio station, Grassly said, "I suggest, you know, obviously, maybe they ought to be removed. But I would suggest the first thing that would make me feel a little bit better toward them if they'd follow the Japanese example and come before the American people and take that deep bow and say, I'm sorry, and then either do one of two things: resign or go commit suicide.

"And in the case of the Japanese, they usually commit suicide before they make any apology."

(CBS)
The senator, at left, wasn't really advocating ritual Japanese suicide for the AIG executives, and later qualified his excessively righteous remarks of indignation as an appeal for apology, remorse and contrition from AIG executives.

Grassley joins a chorus of Capitol Hill voices making clear to their constituents that they are just as outraged as they are about the AIG bonuses and bailout.

President Obama said he was "choked up with anger."

Sen. Christopher Dodd, D-Conn., suggested that AIG bonus recipients pay a provisional tax to recoup taxpayer dollars.

House Minority Leader John Boehner, R-Ohio, pivoted politically on the bonus problem, saying that it helped confirm his belief that Republicans should not support a bailout expansion for banks.

The wagons are circling around the AIG bonuses as if it were Custer's Last Stand, creating a major distraction for the Obama administration, which until recently assumed that AIG was contractually obligated to pay the bonuses.

Speaking on CBS News' Face the Nation on Sunday, Lawrence Summers, Director of the White House National Economic Council, called the AIG bonus situation "outrageous," and then went on to explain the government's take on the bonuses:

"If we simply throw up our hands, refuse to deal with any of this, we'll have the kind of financial catastrophe that we saw after what happened at Lehman Brothers. [Treasury] Secretary Geithner has negotiated very forcefully with AIG. He has done everything that is legally permissible for the government to do to limit the payment of bonuses. But where there are contracts, binding contracts that were entered into long before the government put any money in to AIG -- we're not a country where contracts just get abrogated willy-nilly."

On Monday, Mr. Obama said he would ask Treasury Secretary Timothy Geithner "to use that leverage and pursue every single legal avenue to block these bonuses and make the American taxpayers whole."

But it appears, the legal avenues have been explored and discounted, based on Summers' statement (see Andrew Cohen's post on legal issues surrounding the bonus payments).

AIG CEO Edward Liddy defended the bonus payments as necessary to attract and retain "the best and brightest talent to lead and staff" and that compensation should not be subject to "continued and arbitrary adjustment by the U.S. Treasury."

Politico's Roger Simon didn't buy into Liddy's defense:

"The best and the brightest? Is this guy serious? As of Sunday, AIG stock had gone down 99 percent over the past year because of these geniuses. But we have to worry they might quit and go elsewhere?

"Fine. Let them go. Maybe they can get jobs in Zimbabwe, where kleptocracy is official policy. I think some of them would feel more comfortable there."

LOL ROTFLMAO so good!!!! so good!!!

[gunnyh1]

Sorry that last post did not copy over very well but here is a better article pertaining to this. With this information who cares about their bonuses.... look at how these greedy idiots destroyed our economy. If this is not criminal negligence...... Also keep in mind that any politician that does not act on this most likely received huge amounts of campaign donations and political charity donations from the same bankers!!!!!!

CFTC: Speculators caused 2008 oil price crisis

Daniel Tencer
Raw Story
Wednesday, July 29, 2009

In a major U-turn from its claims during the Bush administration, the Commodity Futures Trading Commission is now set to admit that speculation in oil markets ? and not the forces of supply and demand ? are behind last year?s massive oil price spike.
In the summer of 2008, oil prices on the open market reached an unprecedented $147 per barrel. Many economists argue the spike helped push the US into an economic free-fall last autumn.
At the time, the CFTC ? which is tasked with regulating commodity and financial futures ? said that the huge price spike was a result of supply and demand. That explanation was met with ridicule from many market-watchers, who said it was impossible that demand for oil increased by such a huge margin even as the North American, European and Japanese economies were slowing down.
Now, according to a scoop in the Wall Street Journal, the CFTC is about to reverse its Bush-era position, and admit that market speculators ? investors who bought oil futures on the expectation they would rise in value ? ?played a significant role? in the oil spike.
Bart Chilton, a CFTC commissioner, told the WSJ that the original assessment was based on ?flawed data.? He told the newspaper that the CFTC?s report, which will be released next month, will acknowledge the role of speculators in oil markets.
The CFTC?s admission highlights the often dangerous role that Wall Street speculators play in Main Street?s economic health. Many policymakers are now beginning to wake up to the reality that speculation in commodities markets can cause massive damage to the pocketbooks of ordinary citizens.
The Columbia Journalism Review reminds readers that, in his Rolling Stone article ?The Great American Bubble Machine,? Matt Taibbi describes how major Wall Street players gamed the oil market:
With the public reluctant to put money in anything that felt like a paper investment, the Street quietly moved the casino to the physical-commodities market ? stuff you could touch: corn, coffee, cocoa, wheat and, above all, energy commodities, especially oil.
Oil futures in particular skyrocketed, as the price of a single barrel went from around $60 in the middle of 2007 to a high of $147 in the summer of 2008?
But it was all a lie. While the global supply of oil will eventually dry up, the shortterm flow has actually been increasing. In the six months before prices spiked, according to the U.S. Energy Information Administration, the world oil supply rose from 85.24 million barrels a day to 85.72 million. Over the same period, world oil demand dropped from 86.82 million barrels a day to 86.07 million. Not only was the shortterm supply of oil rising, the demand for it was falling ? which, in classic economic terms, should have brought prices at the pump down?

So what caused the huge spike in oil prices? Take a wild guess.

The CJR writes: ?Note that Taibbi?s hardly the first person to say that the money from the housing bubble moved to form the commodities bubble, which remember, not only sent gas prices skyrocketing but helped cause dangerous food disruptions around the world.?
The CFTC?s turnaround comes after many other major oil-market regulators already came to similar conclusions. Last month, the European Union and OPEC agreed at a meeting that regulation of oil markets would be necessary to prevent future oil bubbles.
?The 2008 bubble could be repeated if adequate regulatory reforms, including greater transparency, (are) not made as part of an overall reshaping of the global financial sector,? Reuters quoted EU officials as saying in a statement.
The CFTC now seems to agree with this view, but the WSJ points out that there is no consensus on this issue. Wall Street speculators may fight hard to keep their ability to profit off of commodity bubbles ? potentially setting the stage for an international political showdown over financial market regulation.
?These decision makers don?t present a united front,? the WSJ reported. ?The U.K.?s Financial Services Authority has found no evidence that speculators are behind big oil-price swings, people familiar with the matter said.?

[gunnyh1]

These people (bankers) are nothing but common criminals. Henry Paulson and all his cronies need to be in leg irons working on a chain gang. They have destroyed hundreds of thousands of lives, savings and jobs with their paper oil speculation. If Congress and the President fail to take these greedy ^%())s to task then we need a vote of NO Confidence on the next General Election ballot. Here is what is developing concerning this....and the CFTC commisssioners need to be have their jobs terminated immediately.

News Alertfrom The Wall Street Journal----------------------------Sponsored by NASDAQ OMX---------------------------- The Commodity Futures Trading Commission plans to issue a report next month suggesting speculators played a significant role in driving wild swings in oil prices -- a reversal of an earlier CFTC position that augurs intensifying scrutiny on investors. In a contentious report last year, the main U.S. futures-market regulator pinned oil-price swings primarily on supply and demand. But that analysis was based on "deeply flawed data," Bart Chilton, one of four CFTC commissioners, said in an interview Monday. ssue a report next month suggesting speculators played a significant role in driving wild swings in oil prices -- a reversal of an earlier CFTC position that augurs intensifying scrutiny on investors. In a contentious report last year, the main U.S. futures-market regulator pinned oil-price swings primarily on supply and demand. But that analysis was based on "deeply flawed data," Bart Chilton, one of four CFTC commissioners, said in an interview Monday.

[Jade_River]

Pay for executives is just nibbling around the edges of the problem here. Wall Street is one big mirror, shrouded in smoke. When you do nothing but sit on your butt to make money, sooner or later people are going to want something for that money other than a quarterly balance sheet. Give me some fruit and vegetables from a roadside stand for a few bucks...now that's an economy.

[pensacola8-2009]

Congress had a good model to follow during the recent bailouts. In the Jimmy Carter Administration, Chrysler CEO Lee Iaccoca championed a campaign to save his company with the help of a government loan that was paid back with interest ahead of schedule.

There was a more severe economic crisis during the recent bail out legislation, than what congress or the public really comprehended. We nearly saw the end of capitalism right before the election and congress was doing the best with what they had in front of them.

The bonus jealousy that inflames the country and especially the unemployed, the credit consumer repaying debt, and 401K holder paying new fees, is a sign of the times.

It simply kills optimism and hopes for justice to see bonuses paid out like that when honest consumers such as myself are getting cheated.


Congress must remove the power of all lobbyists and think for theirselves and face their voters, instead of their campaign treasury.

[grabandgo]

You nailed it with this comment.
Lobbying needs to be illegal!

[swmiller58]

I have a very simple way of doing this. Bonuses should be directly tied to profits or lack of profit. If your company makes 5% profit, then you would get a 5% raise and/or bonus. If your company loses money, you get no raise or bonus. Very simple and very fair. This would be a tremendous incentive because you know your raise and bonus is tied directly to the profits of the company. Also, companies would have no problem retaining people...because a person would not leave a job to go someplace else if every company had the same rule (you are not going to get a better raise and bonus deal someplace else, so why leave). This idea makes raises and bonuses fair and levels the playing field for competitors. SIMPLE!

[swmiller58]

I have a very simple way of doing this. Bonuses should be directly tied to profits or lack of profit. If your company makes 5% profit, then you would get a 5% raise and/or bonus. If your company loses money, you get no raise or bonus. Very simple and very fair. This would be a tremendous incentive because you know your raise and bonus is tied directly to the profits of the company. Also, companies would have no problem retaining people...because a person would not leave a job to go someplace else if every company had the same rule (you are not going to get a better raise and bonus deal someplace else, so why leave). This idea makes raises and bonuses fair and levels the playing field for competitors. SIMPLE!

[diverinnl]

What is not outlined in the article is that Band of America did not lose any money this year. In fact, they had a $4B NET income after expenses. What the writer of this article calls a "loss" is actually a decrease in NET profits. In 2007, B of A had $14B in NET income versus $4B this year. The writer calls that a $10B loss. In actuality, B of A distributed $3.8B, or 95% of its NET to it's executives and top performers. CBS should have more honest writers!